ES 60.34 (+1.58%)
US30040W1080Utilities - RegulatedUtilities - Regulated Electric

Last update on 2024-06-06

Eversource Energy (ES) - Piotroski F-Score Analysis for Year 2023 (Final Score: 3/9)

Comprehensive Piotroski F-Score analysis of Eversource Energy (ES) in 2023. Final score: 3/9. Learn about its profitability, liquidity, and operational efficiency.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 3

We're running Eversource Energy (ES) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
0
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
0
Current Ratio is growing?
1
Number of shares not diluted?
0
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
0

Piotroski F-Score is used to reflect a company's financial health based on 9 criteria such as profitability, liquidity, and efficiency. Eversource Energy (ES) scored 3 out of 9 in this analysis. Their net income was significantly negative, indicating financial distress for the most recent year, though positive cash flow suggests operational strength. The company’s leverage has increased, reflecting higher financial risk, and while their current ratio slightly improved, it remains below the industry median. There have been increases in outstanding shares, which can dilute value, and both gross margin and asset turnover ratios have declined, indicating reduced efficiency and effectiveness in using assets.

Insights for Value Investors Seeking Stable Income

Based on the analysis, Eversource Energy (ES) exhibits some concerning signs such as negative net income, increased leverage, share dilution, and declining efficiency in profit margins and asset turnover. However, the strong positive cash flow is a positive aspect. For investors, this stock may not be highly attractive unless they have a high-risk tolerance or see specific potential for significant improvement in the factors mentioned. A deeper investigation into the causes of these issues and potential for recovery or improvement would be prudent before making a decision.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Eversource Energy (ES)

Company has a positive net income?

Net income measures a company's profitability. Positive net income implies the company is profitable, while negative net income indicates losses.

Historical Net Income of Eversource Energy (ES)

Eversource Energy (ES) reported a net income of -$442.24 million in 2023. This figure is indicative of a significant downturn, given the historical trend. An examination of the past 20 years reveals fluctuations with mostly positive earnings, except for 2005 and 2023. The latest negative net income is a concerning deviation from the otherwise positive trend observed from 2006 to 2022. This negative net income results in 0 points for this criterion and indicates financial distress in the latest fiscal year. While past performance showcased stability, the substantial negative result in the latest year warrants further investigation into the causes behind this substantial financial hit.

Company has a positive cash flow?

Cash flow from operations (CFO) indicates how much cash a company generates from its regular operating activities. Positive CFO is essential because it shows the company's ability to generate sufficient cash flow to maintain and grow operations.

Historical Operating Cash Flow of Eversource Energy (ES)

Eversource Energy's CFO for 2023 stands at $1.65 billion, which is positive. Historically, the company's operating cash flow has shown a strong trend, notably peaking at $2.40 billion in 2022. This positive cash flow suggests that Eversource Energy is effectively managing its operational activities to generate cash, which is crucial for covering operational expenses, servicing debt, and making capital investments. Such consistent performance is a strong indicator of financial health and sustainability.

Return on Assets (ROA) are growing?

The criterion measures the change in Return on Assets (ROA), which indicates a company's profitability relative to its total assets. It's crucial for assessing how efficiently a company utilizes its assets to generate earnings.

Historical change in Return on Assets (ROA) of Eversource Energy (ES)

In 2022, Eversource Energy had a ROA of 0.0276, while in 2023 it dropped drastically to -0.0081. This decline in ROA suggests a decrease in profitability and efficiency in using its assets. This poor performance mirrors a challenging financial year, and considering the industry median ROA for 2023 is at 0.4109, Eversource Energy lagged substantially behind industry standards. Therefore, for the Piotroski F-Score, Eversource Energy earns 0 points for this criterion due to the decline in ROA.

Operating Cashflow are higher than Netincome?

Assess whether Eversource Energy's Operating Cash Flow (OCF) for the year is higher than the Net Income and add 1 point if OCF is higher. This helps in evaluating the quality of earnings, indicating that earnings are backed by real cash flow.

Historical accruals of Eversource Energy (ES)

The Operating Cash Flow (OCF) for Eversource Energy in 2023 is $1,646,161,000 whereas the Net Income is -$442,240,000. Since OCF is significantly higher than Net Income, it scores 1 point for this criterion. This scenario illustrates a positive trend in terms of liquidity and operational efficiency, suggesting that the company's profitability is backed by real cash flows rather than accounting adjustments or temporary factors. Examining historical data, this has been a consistent pattern for the company, with OCF generally tracking above Net Income, indicating robustness in operational activities.

Liquidity of Eversource Energy (ES)

Leverage is declining?

Change in Leverage compares the company's financial risk by measuring its debt compared to equity. A reduction indicates better financial health.

Historical leverage of Eversource Energy (ES)

For Eversource Energy (ES), the leverage increased from 0.3782 in 2022 to 0.4308 in 2023. This marks a rise, indicating higher financial risk as the company is taking on more debt relative to its equity. Over the last two decades, leverage has generally fluctuated but has significantly risen to its highest point in 2023. Such an increase can be concerning as it suggests the company is relying more on debt, which might negatively impact its financial stability and potentially subject it to higher interest obligations and financial stress. Hence, for this criterion, no point is given.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay its short-term obligations with short-term assets. An increasing ratio suggests improving liquidity.

Historical Current Ratio of Eversource Energy (ES)

Comparing data, Eversource Energy's Current Ratio increased from 0.6211 in 2022 to 0.6699 in 2023, illustrating a growth trend. Although still trailing behind the industry median of 0.7878, this rise signifies better financial health. For context, in 2003 Eversource Energy's Current Ratio was significantly higher at 1.2258; the latest figures thus mark a recovery since the dip, particularly from lows in 2016 (0.5573). Consequently, Eversource Energy would add 1 point per Piotroski criteria, embracing a positive but still cautious note regarding liquidity.

Number of shares not diluted?

This criterion assesses whether the number of shares outstanding has decreased from one year to the next, indicating potential share buybacks, which can be a positive signal of shareholder value enhancement.

Historical outstanding shares of Eversource Energy (ES)

Eversource Energy's outstanding shares increased from 346,783,444 in 2022 to 349,580,638 in 2023, indicating an addition of 2,797,194 shares. This results in a score of 0 for this criterion as there was no share reduction. Historically, the trend shows that Eversource Energy tends to increase its shares outstanding over time, except for a notable drop between 2011 and 2012. The persistent expansion in shares may imply financing operational growth through equity or potential acquisitions, but it may also dilute existing shareholders' value.

Operating of Eversource Energy (ES)

Cross Margin is growing?

Gross Margin represents the proportion of revenue that exceeds the cost of goods sold. A higher Gross Margin indicates better operational efficiency.

Historical gross margin of Eversource Energy (ES)

Comparing the Gross Margin year over year, Eversource Energy showed a decrease from 0.4402 in 2022 to 0.4069 in 2023. This trend is unfavorable as the Gross Margin dropped, indicating reduced efficiency. Over the last 20 years, the highest Gross Margin Eversource Energy achieved was in 2012 at 0.646, and the Industry Median showed varying efficiency traits with the highest peak in 2004 at 0.5944.

Asset Turnover Ratio is growing?

Asset Turnover indicates a company's efficiency in utilizing its assets to generate revenue; an increase suggests improved efficiency.

Historical asset turnover ratio of Eversource Energy (ES)

The Asset Turnover for Eversource Energy (ES) decreased from 0.2416 in 2022 to 0.2189 in 2023. This decline indicates that the company was less efficient in generating revenue from its assets compared to the previous year. Therefore, under Piotroski's F-Score method, this would earn Eversource Energy 0 points for this criterion. Analyzing the trend over the last 20 years, it's observed that the Asset Turnover has gradually decreased from a high of 0.6107 in 2005 to the current lower levels, highlighting a long-term challenge in asset utilization efficiency for the company.


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